%0 Journal Article %1 coleman2018precision %A Coleman, Thomas %D 2018 %I SSRN %J SSRN eLibrary %K quantfinance sharpe %R 10.2139/ssrn.2959632 %T How Precision of the Sharpe Ratio Improves With Monthly Data %X Practitioners often estimate the Sharpe ratio using annualized monthly data. This paper demonstrates how the bias and precision of the Sharpe improves with monthly versus annual data. I provide small-sample and large-sample formulae for the distribution, highlighting the distinction between the annual and annualized monthly estimators. With more than two years of monthly data the large-sample distributions generally provide a good approximation, simplifying the calculation of confidence intervals; this applies for both normal and non-normal returns. Although these results apply to iid returns they are of practical use, since independence for monthly returns is a good description for many financial assets.

@article{coleman2018precision, abstract = {Practitioners often estimate the Sharpe ratio using annualized monthly data. This paper demonstrates how the bias and precision of the Sharpe improves with monthly versus annual data. I provide small-sample and large-sample formulae for the distribution, highlighting the distinction between the annual and annualized monthly estimators. With more than two years of monthly data the large-sample distributions generally provide a good approximation, simplifying the calculation of confidence intervals; this applies for both normal and non-normal returns. Although these results apply to iid returns they are of practical use, since independence for monthly returns is a good description for many financial assets.}, added-at = {2018-06-12T06:50:05.000+0200}, author = {Coleman, Thomas}, biburl = {https://www.bibsonomy.org/bibtex/2706e3f6bd714a576b755b4cd78908abe/shabbychef}, description = {How Precision of the Sharpe Ratio Improves With Monthly Data by Thomas Coleman :: SSRN}, doi = {10.2139/ssrn.2959632}, interhash = {ea15772b35afb14380bfe897605b5057}, intrahash = {706e3f6bd714a576b755b4cd78908abe}, journal = {SSRN eLibrary}, keywords = {quantfinance sharpe}, language = {English}, location = {https://ssrn.com/paper=2959632}, publisher = {SSRN}, timestamp = {2018-06-12T06:50:27.000+0200}, title = {How Precision of the {S}harpe Ratio Improves With Monthly Data}, type = {Working Paper Series}, year = 2018 }